How to Comply With the EU's CSRD - 2026 Omnibus Update

In February of last year (2025), the European Commission presented the first part of an Omnibus package aimed at simplifying and rolling back certain elements of the Corporate Sustainability Reporting Directive, which the EU put in place in 2022 through the Commission Delegated Regulation.

Later, the European Parliament endorsed this package, and ultimately approved it with some modifications in December.

This article goes over how the recent approval of the Omnibus update package changed CSRD requirements, namely, by significantly narrowing its scope.

[For information on other GHG and sustainability reporting programs throughout the world, see our GHG reporting guide.]

Table of Contents

What is the CSRD? Basics Pre-Omnibus Package
Which Companies Must Comply with the CSRD After Omnibus Package Approval?
When Do Companies Need to Start Reporting Under CSRD? New CSRD Implementation Timelines and Reporting Thresholds
CSRD Penalties for Non-Compliance
What Gets Reported Under CSRD: European Sustainability Reporting Standards (ESRS)
The Four Main Parts of ESRS Simplified Standards - Breaking Down ESRS E5, Circular Economy
How to Prepare for CSRD and ESRS Reporting

What is the CSRD? Basics Pre-Omnibus Package

The EU adopted the Corporate Sustainability Reporting Directive to revise and supersede the Non-Financial Reporting Directive (NFRD) from 2014. The CSRD requires companies based in the EU (and non-EU firms listed on an EU market and those with significant EU subsidiaries or branches) to disclose information on their business model, policies, risks, targets, and due diligence surrounding Environmental, Social, and Governance (ESG) criteria.

With this directive, the EU hopes to further standardize ESG reporting, increase transparency, and offer clearer sustainability data to investors and consumers who may rely on it to make personal and business decisions.

That is why the CSRD is considerably broader in scope than its predecessor, the NFRD. It applies to many more businesses, introduces more detailed reporting criteria, makes third-party auditing mandatory, and requires a stand-alone report (rather than being included as part of an annual report) and a specific electronic format (ESEF/XHTML).

The CSRD also retains the NFRD’s focus on double materiality.

What is Double Materiality Under the CSRD?

Under the double materiality principle, companies must report how sustainability issues affect their enterprise value (financial materiality, which “flows from the outside in”) and how their activities affect people and the environment (impact materiality, which “flows from the inside out”).

In other words, they are no longer being asked to consider merely the risk climate change poses to their operations, but also the role they have played in exacerbating climate change (and other social issues).

Of course, they must only consider those issues that are relevant (material) to their companies, in the sense that they may influence the decisions of consumers, investors, or other stakeholders. Not all climate-related issues are material to every company.

Examples of financially material issues include cash flows, risks, and access to funding. Examples of issues relevant to impact materiality include GHG emissions, water pollution, and respect for human rights.

Which Companies Must Comply with CSRD After Omnibus Package Approval?

The first version of the Corporate Sustainability Reporting Directive targeted three broad groups of companies:

• Companies listed on an EU-regulated market exchange, except for micro-undertakings (companies with fewer than 10 employees, less than €450,000 in total assets, and/or less than €900,000 in net annual turnover)
• Large EU-based undertakings, listed or not, that meet two of the following three criteria on any two consecutive balance sheet dates:
  • At least €25 million in total assets
  • At least €50 million in net turnover
  • At least 250 employees (average) during the year
• Non-EU parent companies with annual EU revenue of at least €150 million (in the most recent two years) that also own any large EU-based undertaking, EU-based subsidiary with securities listed on an EU-regulated market exchange, or an EU branch office with at least €40 million in net turnover

SMEs were also included in the original scope, although they were allowed to opt out until 2028.

As a result of the Omnibus package being approved, the number of companies that fall under the scope of the CSRD has been reduced by roughly 85%.

As far as EU businesses go, only large companies with 1,000+ employees and a net annual turnover of €450 million or more remain within the scope of the CSRD. Non-EU companies with a net annual turnover in the EU at or above €450 million must also report, as do their subsidiaries and branches generating turnover in the EU above €200 million.

Companies with fewer than 1,000 employees, including SMEs, are no longer required to report anything beyond the information specified in the voluntary reporting standards (VSME), even if requested to do so by their large business partners.

If you happen to work for a company that now finds itself free of its reporting obligations, keep in mind that the approved Omnibus package includes review clauses that may re-broaden the CSRD’s scope in the future. Among them is a plan to create a delegated Act for a voluntary reporting standard—it would target companies larger than the SMEs covered by the VSME, but not large enough to report for the CSRD.

When Do Companies Need to Start Reporting Under CSRD? New CSRD Implementation Timeline and Reporting Thresholds

Following the approval of the Omnibus I package described above, most deadlines for CSRD compliance were postponed or effectively repealed. Let’s look at each compliance phase separately.

CSRD Reporting Compliance Phase 1: Listed Large Companies

The first wave of CSRD reports were intended for large companies (500+ employees) listed on an EU-regulated market exchange, as they were already subject to the NFRD and would have had enough familiarity with sustainability reports to integrate the new requirements.

Reports from these companies were due in 2025 for fiscal year (FY) 2024.

While it is likely most of these companies submitted their FY 2024 reports already, the approval of the Omnibus package introduced the option for EU Member States to exempt these companies from their obligations going forward.

Therefore, companies who were originally required to report in 2025, 2026, and 2027 for FY 2024, FY 2025, and FY 2026, respectively, may be allowed by their home countries to skip these obligations and fall into the second compliance phase instead.

CSRD Reporting Compliance Phase 2: Large Companies

Originally, the second compliance phase applied to large companies that were not subject to the NFRD but otherwise met the CSRD reporting criteria, alongside listed large public companies, EU-based conglomerates, and listed non-EU companies.

With the simplification of the CSRD’s scope, this compliance phase now applies to all large companies as defined above (1,000+ employees and €450M+ in net turnover), listed on an EU-regulated market exchange or not.

The Omnibus package has also postponed the first reports for this cohort by two years, from 2026 (for FY 2025) to 2028 (for FY 2027).

CSRD Reporting Compliance Phase 3: Small and Medium Enterprises

SMEs, who were originally requested to begin reporting in 2027 (but could have opted out until 2028), are no longer within the mandatory scope of the CSRD and are as such not bound by any compliance deadlines.

CSRD Reporting Compliance Phase 4: Non-EU Companies

The deadline for the fourth compliance phase remains unchanged, but the number of companies subject to it has decreased significantly.

Before, this phase applied to non-EU companies with turnovers of €150M+ that owned EU subsidiaries or branches that were themselves considered large (250+ EU-based employees, a balance sheet exceeding €20M, and/or local revenue exceeding €40M).

The fourth compliance phase now only applies to non-EU companies with €450M+ in net annual turnover and EU subsidiaries or branches with €200M+ in net annual turnover. They must submit their first reports in 2029 (for FY 2028).

Summary of CSRD Implementation Timeline After Omnibus Package Approval

Refer to the table below for a summary of new compliance deadlines after the approval of the Omnibus package in December 2025.

By January 1st of 2028, the rules of the CSRD will apply to all companies that fall under its scope. They must submit annual reports via the European Single Electronic Format (ESEF) and digitally tag information by using iXBRL.

Get a head start on your reporting with a corporate sustainability software that guarantees data integrity across all CSRD topics material to your organization, thanks to built-in templates, a robust library of standard metrics, and calculations backed by a database of emission and conversion factors.

What Gets Reported Under CSRD: European Sustainability Reporting Standards (ESRS)

If the CSRD establishes the why, who, and when of sustainability reporting in the EU going forward, the European Sustainability Reporting Standards define the what and how.

Developed by the European Financial Reporting Advisory Group (EFRAG), the ESRS provide companies subject to the CSRD with the framework they must follow and the metrics they must report when preparing their sustainability disclosures.

There are 12 ESRS in total: two Cross-Cutting standards required of all organizations governed by the CSRD, five Environment standards, four Social standards, and one Governance standard.

• ESRS 1 – General Requirements
• ESRS 2 – General Disclosures
• ESRS E1 – Climate
• ESRS E2 – Pollution
• ESRS E3 – Water and Marine Resources
• ESRS E4 – Biodiversity and ecosystems
• ESRS E5 – Resource Use and Circular Economy
• ESRS S1 – Own Workforce
• ESRS S2 – Workers in the Value Chain
• ESRS S3 – Affected Communities
• ESRS S4 – Consumers and End Users
• ESRS G1 – Business Conduct

The structure of these standards—a general foundation, then issue-specific ones—is similar to that of the GRI Framework, which contains three universal standards (including one for General Disclosures), followed by over 30 sector standards for specific topics. Familiarizing yourself with the GRI could facilitate your compliance with the CSRD once the final drafts of the ESRS are released.

Initially, the CSRD required companies in scope to conduct comprehensive value chain mapping (both upstream and downstream), obtain reasonable assurance, follow sector-specific ESRS, and provide information for as many as 1,073 data points across these 12 standards.

The passing of the Omnibus package saw the first three requirements being removed (though limited assurance is still obligatory, and guidance on sector-specific standards may follow later) and the number of data points slashed by 70%, to 320 in total.

These modifications will make the lives of sustainability reporters at these companies much easier… and yet, the question remains: what are ESRS standards?

Let’s break down one of these standards together to get a better idea. Below, we will go through the latest draft of ESRS E5, the standard related to Resource Use and Circular Economy.

The Four Main Parts of ESRS Simplified Standards – Breaking Down ESRS E5, Circular Economy

Every ESRS is composed of the four main parts below. The only notable exception is ESRS 1, which, rather than being arranged in the same order as the parts below, reads more like a list of 10 separate yet interconnected general requirements.

Objective

The first pages of an ESRS usually contain an overview of the standard and its legal background.

In the case of ESRS E5, this section introduces the standard’s sub-topics (resource inflows, resource outflows related to products and services, and resource outflows related to waste) and makes reference to the Clean Industrial Deal, the Circular Economy Action Plan, and other key regulatory frameworks defining the EU’s circular economy ambitions that set the stage for the creation of this ESRS.

Interaction with Other ESRS

Acknowledging the potential for overlap in the ESG issues targeted by the CSRD and the confusion it may cause reporters, EFRAG included a section in each ESRS document clarifying the differences between the ESRS in question and the other topical ESRSs with which it interacts.

For example, ESRS E5 shares “points of interaction” with all other Environmental standards (E1 to E4) and with Social standards S3 and S4. To differentiate between E1 and E5, the document states that E1 “addresses climate change mitigation, climate change adaptation, and energy consumption”, whereas E5 is primarily focused on the “inflows of materials (including fossil fuels not used for energy), resource extraction and circular economy practices that can reduce GHG emissions (carbon footprint) and energy intensity”.

Disclosure Requirements (DRs)

This is where the ESRS document explicitly outlines what goes into a CSRD report for a given ESRS.

Remember, companies only have to abide by the disclosure requirements of an ESRS if that issue is material to their operations.

This fact is made evident by the first three DRs (E5-1, E5-2, and E5-3) in ESRS E5. They mandate companies to disclose their policies, actions, and targets (as well as circular economy principles and eco-design requirements) related to resource use and circular economy in accordance with ESRS 2; a company without any such policies, actions, and targets would therefore not be subjected to ESRS E5, though it may suffer some repercussion as a result of this omission.

After these three generic guidelines, ESRS E5 goes on to list what exactly companies need to disclose regarding their resource inflows and resource outflows.

Resource Inflows (the types and circularity of resources entering the business)

• Key materials used (description and indication of any critical and strategic raw materials contained)
• Total weight of all key materials
• Breakdown of each key material, expressed in weight or as a percentage of the total weight of all key materials
• Secondary resources used, expressed in weight or as a percentage of the total weight of all key materials

Resource Outflows (how the business contributes to the circular economy through their products and services and through the way they manage waste)

• Products
  • Qualitative/quantitative information on the expected durability of its key products
  • Qualitative/quantitative information on the extent to which its key products are repairable
  • The designed recyclability rate of its key products and their packaging
• Waste from own operations
  • Description of waste streams
  • Total weight of waste generated
  • Proportion of waste diverted from disposal as a percentage of total waste generated AND proportion of waste directed to disposal as a percentage of total waste generated
    • Broken down between hazardous waste and non-hazardous waste
    • Broken down by operation type
      • Reuse, recycling, or other recovery operations for diverted waste
      • Incineration, landfill, or other disposal operations for waste directed to disposal
  • Proportion of waste for which the final destination is unknown as a % of total waste generated
  • Total amount of radioactive waste generated

Application Requirements (ARs)

Application requirements, often found in the appendices of the ESRS documents, give additional information on some of the specific provisions of certain DRs, namely, how they should be applied.

Consider the DR requiring companies to indicate whether any key materials contain critical and/or strategic raw materials. AR 2 tells reporters where they can find definitions for these terms (Annexes I and II of the Critical Raw Materials Act) and provides an illustrative example: the lithium inside Li-ion batteries must be identified as a critical and strategic raw material.

ARs can be as simple as a formula, as is the case with AR 3, which outlines the equation businesses must use to calculate the designed recyclability rate of products (see image below) and packaging.

Lastly, ESRS E5 also has a handful of ARs that provide clarity on reporting waste, for example, by specifying that the weight of each material must be in its original state and that a full list of disposal and recovery operations can be found in Annexes I and II of the Waste Framework Directive, respectively.

How to Prepare for CSRD and ESRS Reporting

If you feel completely unprepared for the CSRD reporting season, don’t worry, you have plenty of time to get ready before the first batch of (postponed) reports are due.

In the lead-up to 2028, your top priority should be to assemble a kind of “CSRD response team” that is capable of collecting and understanding the data required by the directive. Include yourself and other experts in sustainability and financial reporting, those responsible for data management, legal, and communications, and any other relevant internal and external stakeholders.

If your company already builds some form of sustainability reporting or reports climate-related disclosures, however voluntary or sparse they may be, audit these to identify gaps between what you are already doing and what the CSRD requires from you.

Another best practice is developing detailed documentation procedures for data capture, validation, change management, and report preparation all throughout your company, and conducting a materiality assessment if you have never done one before.

Most importantly, you will want to compile your sustainability actions, progress updates, and findings into regular reports that you can validate for accuracy and completeness. Doing so will save you a lot of time and stress when the day comes to sit down and prepare the final report.

The easiest way to go about this preparatory step is to enlist the help of a trusted software with built-in reports you can export at the click of a button.

ERA’s Corporate Sustainability Software is an all-in-one tool providing its users with location-based and market-based GHG Emission reports and comprehensive calculations for Scopes 1, 2, and 3, including REC balancing. Our library of ESG metrics and emission factors offers scalability to support any calculation method used by companies of any size, as well as the flexibility to build additional features as regulations change.

Schedule a discovery call with one of our Project Analysts to see how ERA’s software simplifies your sustainability reporting practices and empowers you to work toward your CSRD goals.

Contributing Scientist: